SNB Wake Up Call For ECB? January 19, 2015
SNB Potentially Sending A Message To Super Mario
As crazy as the move was last week after the Swiss National Bank dropped the 1.20 peg to the Euro resulting in hundreds of millions lost from retail brokers forcing some to go bankrupt, this sort of thing was actually unavoidable and there will be more of these in the future. As hind site always being 20/20 we should have known that the Swiss had the highest probability of being the first to move in such a manner, however bad the timing. The reason is the fact that the Swiss Franc, being the strongest currency on the planet, is so because of one thing, sound money policies. Yes they did dip their foot in the Keynesian kool-aid pool but it seems they have learned their lesson and maybe decided to take down some speculators with them.
This week Super Mario gets his chance to show his determination at an ECB QE program. This will be interesting to say the least. Some think its going to be up to a one trillion plan while others think the SNB just forced them to rethink the whole idea and there wont be an announcement. At this point I have my doubts Draghi will disappoint but you can surely bet that he will be tested by the market. The market has a way of doing that when people at the top get wild and crazy ideas that they can control market forces with their policy. It has been proven many times that even central banks cannot manipulate markets long term even though I should say that the SNB peg was has been said to be the most successful CB intervention of all time. Even more than when central banks all got together to help the BOJ in the late 1990s. So what does that say when the most successful CB intervention of all time calls it quits? In short the same thing many have been saying for a long time. The correction is going to happen, its just a matter of time and the longer they try to prop up a failed system that only benefits the rich, the more pain there will be when it does happen. The fact that we are seeing more and more talk of bringing out the guillotine says a lot.
EUR/USD Tests to 2003 Levels
With the large moves last week on the EUR/USD its best to stay open on direction today. Just looking at the clarity I would normally be bias for the next push down but there is also a three push move for over 300 pips in there and on the small chance that Draghi does disappoint in the coming days we should see a reversal of sorts. The lower levels you see on the chart (1.1533, 1.1461 and 1.1398) are all daily levels from November 2003 and as you can also see they are still relevant. I do see a test of the 1.1398 level having more probability but I doubt they will break below before the ECB announcement later this week. The best levels for a short today start with 1.1639 but if they can test 1.1584 during the Asian session and drop to the lower end of the Asian box I will be open for the short there during the London session. Otherwise the long is valid from 1.1461 but if they test there I would rather be short looking to take profits.
GBP/USD Tests 2015 Lows
The GBP/USD is in a similar position but does have a cleaner two intraday push move going so I will have a bias for the short on this pair today. The best level to short from is up at 1.5168 but Thursdays lows are valid as long as they hold them during Asia and I prefer to see them leave the Asian box closer to the lows. The range is wide enough to use so a clear stop run and set up will get me short from 1.5150.
EUR/JPY Finding Support at 2014 Lows
The EUR/JPY has given back the whole move that started with Kuroda going full retard plus some having the BOJ finance everything in the Japanese budget plus buying corporate bonds to try and create some inflation in Japan. We have to wonder if the BOJ will be next in line to give up the QE fiasco but to be honest I highly doubt it. The reason is the Japanese do not give up easily, they are more likely to go down with the ship so to speak holding on to what ever was the last best idea. Just recall the Kamikazes and you understand.
I do expect these lows to hold temporarily but if risk aversion is here to stay then it wont be long until they break. Today I will not have a bias on direction due to the extended move Thursday last week but I do see the higher probability of a test to the 134.11 level to try and see if they can test any buyers there. The best level to short is Fridays high of 136.18 while the strongest level I see for a long is 134.88
Forex News Today
There is nothing note worthy on the calendar today so I expect moves to be risk driven but we may not get much leading up to the ECB decision in a few days. Having said that I wouldnt be surprised to see a tape bomb or two. Otherwise there is Chinese data tomorrow to watch out for if you trade Aussie pairs.
MY APOLOGIES FOR THE BROKEN VIDEO OF INSIDE JOB IN THE COMMENTARY. I DIDNT THINK I WAS COPY WRITE INFRINGING WITH AN ITALIAN VERSION ALREADY ON YOUTUBE. HOWEVER YOU CAN STILL WATCH IT AT THIS LINK. STILL A MUST SEE!
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